Automotive industry in Colombia

Prepared by: Lina Dionicio & David Escobar

Sectoral Economy

Colombia is the fourth largest vehicle producer in Latin America, with more
than 450 thousand units assembled in the last 5 years. The automotive
industry in Colombia is composed of assembly activities (light vehicles,
trucks, buses, and motorcycles) with the presence of eight assembly
plants. The weight of this sector in the industry is of 3.6% and it considers
the eighth sector that generates more employment, according to BBVA’s
Automotive Situation 2018.

According to the results of the Monthly Manufacturing Survey (EMM) in

2018, the manufacturing sector showed a variation of 4,7% due to the
performance of the automotive sector in three activities related to the
industry. One of them was the manufacture of bodywork for vehicles and
trailers which showed a growth of 45,1%, followed by the manufacture of
parts, pieces, and accessories for vehicles that grew 14,5% and finally the
production of motor vehicles and their engines increased 12,6%.

In accordance with Oliverio García, president of the Colombian Association

of Motor Vehicles (Andamos), the results in the production of bodyworks
and trailers were also the best in November of 2018 (with a growth of 22%).
This was due to the increase in sales of trucks of more than 10,5 tons,
whose cumulative demand in that month increased by 44,8%, for which
these manufactures are needed.(Elejalde, 2019)

This sector contributes 6.2% of the country’s industrial GDP, in addition to

manufacturing parts and pieces used in the assembly of vehicles, includes
the assembly of all types of automotive, manufacturing of spare parts and
linking other industries such as metalworking, petrochemicals and textiles,
allowing it to employ 2,5% of the personnel employed in the manufacturing
industry. (Procolombia, s.f.)

The country currently has a fleet of more than 13,6 million vehicles,
including motorcycles (56,7%) and cars, SUVs, buses, and trucks (43,4%).
According to the National Association of Businessmen of Colombia (Andi)
and the National Federation of Traders (Fenalco), recent allies for the
automotive sector, announced that by 2019 they expect the sale of vehicles
in the country to increase 2,8%. Due to the increased access of the
population to the financial system, the growth of the middle class and the
increase in disposable income favor the growth in the sale of automobiles
domestically.

Last year, in December 2018, 33,043 vehicles were registered,

representing an increase of 30.2%, compared to the same month last year
when 25,386 units were registered. According to the data submitted, at the
close of 2018 the automotive sector registered 256.052 plates, of which
49.864 corresponded to Chevrolet vehicles, brand that led the market,
followed by Renault, which registered 49.688 units. (Flórez, 2019)

On the other hand, in the third month of the year 2019, five cities and their
metropolitan areas with the largest number of vehicles
enrolled were Bogotá DC, Medellín (and the metropolitan area of the Valle
de Aburrá), Cali, Barranquilla and Funza, with market shares of 29.4%,
16.0%, 10.4%, 4.2% and 4.2%, respectively, which together accounted for
58.4% of the national market. Compared to the same period of the previous
year, among the first five cities and their metropolitan areas, Funza showed
an important growth of 95.7%, with Barranquilla with 12.7% and Medellín
(Valle de Aburrá) with 0.5%. Meanwhile, Bogotá, D.C. and Cali recorded
decreases in the order of 10.1% and 4.8%, respectively. With respect to the
accumulated to March of the previous year, between these departments:
Cundinamarca, Atlántico, Valle del Cauca and Antioquia increased 35.0%,
14.8%, 5.6% and 0.8%, respectively.

Contrarily, in the most recent report by FENALCO, it was reported that in

September 2018 a total of 46,258 registrations were registered in the
country, which indicates that the number of registered enrollments remains
above 45,000 units. With respect to the previous month, there were 5,957
fewer enrollments, which represents a variation of -11.41%; however, the
expectations of reaching the projections of 550,000 units registered for
December 2018 continued to be consolidated.
 It should be noted that 94% of motorcycles sold in Colombia are produced
locally. In the future it is estimated a growth of 9,7% in the production of
motorcycles between 2018 and 2022.

Opportunities in the domestic market:

Private cars have accounted for 53% of domestic demand, the subsector
with the highest growth potential is that of utility, commercial (bus) and
cargo vehicles. For this reason, one of the most important investment
opportunities offered by the automotive sector is the assembly of assembly
plants for such vehicles, in such a way that the local market can be served
and exported to other countries in the region.

In addition, with the renewal of the fleet associated with the integrated
transport systems of the main cities of the country, there is a greater
demand for buses and workshops for the maintenance of the fleet.

External automotive market:

According to Business Monitor figures, around 6 million vehicles were sold
in Latin America in 2017. The fastest growing markets were Paraguay with
33%, Argentina with 27%, Uruguay with 20% and Chile with 18%.
Argentina and Chile were the countries in South America that showed the
highest value in vehicle imports (USD 8.521 and USD 7.014 respectively).

The potential of the country, which currently has a fleet of more than 155
million vehicles, has motivated various international companies such as
Renault, General Motors, Daimler, Relianz and Goodyear to establish their
operations in Colombia to serve local and regional markets. In total, 280
companies (between small and large) are engaged in the manufacture of
auto parts and of these, 33 companies have reached exports that exceed
USD 1 million. (Procolombia, Procolombia, 2019)

General Motors has been Colombia’s largest automobile company for over
three decades, due to this, Chevrolet sold 49,866 vehicles in Colombia for
2018, earning it a market share of 19.5% percent, the highest among
automobile car brands in that market.

It’s also worth noting that the GM Colmotores plant near Bogotá produced
a total of 47,275 Chevrolet-branded vehicles in 2018. Of these, 34,611
were earmarked for the Colombian market (an increase of 1.5 percent
more compared to 2017) and 12,664 units were exported to Ecuador, Chile
and Bolivia. The export figure is equivalent to $126 million USD and
represents an increase of 142 percent compared to the previous year.

It is important to highlight that within the Daimler portfolio it has been

characterized as one of the most important distributors for the renovation of
the Transmilenio fleet in Bogotá. According to the most recent report of
Fenalco and Andi, Mercedes-Benz buses reached a market share of 20%
in September, which allowed it to grow 16% compared to the same figures
of 2016.

Already in the case of Freightliner, the truck brand accumulated until the
ninth month of the year more than 517 units sold in the heavy traffic
segment. That allowed a 44% market share.

Investment advantages in the automotive sector of Colombia:

This sector remains in constant growth and offers guarantees to access a
market of 1.500 consumers. It also has high-quality products, produced by
qualified human talent, with competitive costs and specialization in different
segments such as chassis and electrical systems. To facilitate access to
the local market, the country does not have import duties; and goods sold
in the Free Trade Zones in Colombia are exempt from VAT, according to
Procolombia.

References
BBVA. (Marzo de 2018 ). Obtenido de
https://www.bbvaresearch.com/wp-content/uploads/2018/03/Sit
uacionAutomotriz2018.pdf
Elejalde, L. L. (19 de enero de 2019). ​La República ​. Obtenido de
https://www.larepublica.co/economia/sector-automotor-impulso
-el-crecimiento-de-47-de-la-industria-manufacturera-2817597
Flórez, C. D. (13 de febrero de 2019). ​La República .​ Obtenido de
https://www.larepublica.co/empresas/fenalco-y-andi-preven-cre
cimiento-de-28-del-sector-automotor-colombiano-en-2019-282
7539
Procolombia. (1 de febrero de 2019). ​Procolombia.​ Obtenido de
https://www.inviertaencolombia.com.co/noticias/1219-radiografi
a-de-la-industria-automotriz-en.html
Procolombia. (s.f.). ​Procolombia ​. Obtenido de
http://www.procolombia.co/compradores/es/explore-oportunida
des/la-industria-automotriz